The 20-year-old youth product, who joined the club at the age of nine, made 33 first-team appearances during a breakthrough campaign last season.
As is club policy, the length of the new contract has not been made public but the news could put an end to speculation linking other clubs with the attacking midfielder.
Recent reports had suggested Aston Villa were bidding to sign the England Under-21 international.
Gunners manager Mike Arteta said: “As we all saw last season, Emile is an intelligent player with excellent ability.
“His sharpness on the turn and exceptional vision have already made him a key player for us. His attitude and willingness to learn have also been very impressive.
“I know the fans will join us in being delighted that Emile has committed his future to the club.”
Arsenal have also announced Smith Rowe, who has also had loan spells at Huddersfield and Leipzig since making his senior debut in 2018, will now take the squad number 10.
Technical director Edu said: “It’s great to see another young player develop through our academy system to become a key part of our first team.
“Emile is a player who represents the future of the club and this is why we have given him the number 10 shirt.”